Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “What caused the big rally on Friday?”, and was written on October 7th, 2023.

Weekly summary in a paragraph

The US stock market indices were mixed this week, as US treasury yields kept rising while the recently strong oil prices fell substantially. The European stock market managed to stay afloat and was helped by the first signs of dollar weakening in weeks. The 2-10y spread tightened significantly this week and is still inverted at -30 basis points. In economic data, there were strong job reports on Tuesday and Friday as well as ISM non-manufacturing data almost in line. In corporate news, McCormick and Levi’s published disappointing earnings reports while Constellation Brands beat expectations. Next week the first significant batch of Q3 earnings will come in, as large US banks such as JP Morgan, Wells Fargo and Citi report.

Asset classes weekly performance

This week the Dow finished -0.3% lower (+0.8% year to date) while the S&P500 gained +0.5% (+12.2% year to date), the Nasdaq rose +1.6% (+28.3% year to date) and the Russell 2000 gave up -2.2% (-0.9% year to date). Gold finished -1.0% lower (flat year to date) while Silver lost -3.0% (-10.4% year to date). Crude Oil tanked -6.8% (+9.8% year to date). The 10-y US treasury yield rose +2.2% (+26.1% year to date). The European stock market was barely higher at +0.1% (+8.7% year to date). The Euro gained +0.26% against the US Dollar (-1.10% year to date).

Weekly pitch

It was a fairly negative week on the stock market as several positive jobs report came in better than expected leaving investors little chances to hope for a shift in monetary policy. Oversold conditions worsened at the start of the week and the S&P500 approached its 200-day moving average. And yet, despite the very strong report on Friday, the US markets staged a significant rally probably due to the average hourly earnings coming in cooler than expected. Investors can be unreasonably selective in terms of which data to base their decisions on. In the medium term, however, yields and inflation data are likely to affect where the markets go from here. In the long term, earnings and earnings expectations drive stocks. Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market and to emerging markets.

Weekly Portfolio Update

Here are this week’s movements: we have taken partial profits on our Halliburton long position (+30.4%). We have accumulated on our Boeing, Newmont Mining, Brazil ETF and silver ETF long position. Sell stops were triggered on our Desktop Metal long position. Cash, US treasury bills, precious metals and hedges amount to 37% in our portfolio (decreased compared to last week).

Top 5 Weekly Portfolio Performers

Foot Locker +14.1% (Apparel)

ProShares UltraPro Short Russell 2000 +6.6% (3x inverse the Russell 2000)

Google +5.2% (Tech)

Meta Platforms +5.1% (Tech)

Walt Disney +2.3% (Entertainment)

Portfolio Asset Allocation

US stocks long positions 49% (unchanged)

EU stocks long positions 8.5% (unchanged)

Emerging markets long positions 5.0% (increased)

US stocks short positions 0.5% (reduced)

Hedges 7.5% (unchanged)

Silver & Gold 2.5% (increased)

US Treasury bills 2% (unchanged)

Cash 25.0% (decreased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +9.2% (excl. dividends) vs the S&P500 gain of +15.1%.

Invest responsibly!!!